Question

Rusties Company recently implemented an activity-based costing system. At the beginning of the year, management made the following estimates of cost and activity in the company's five activity cost pools: Activity Cost Pool Labor-related Purchase orders Product testing Template etching General factory Activity Measure Direct labor-hours Number of orders Number of tests Number of templates Machine-hours Expected Overhead Cost $ 43,308 $ 2,160 $ 5,700 $ 1,950 $ 68,600 Expected Activity 2,406 DLHS 540 orders 300 tests 65 templates 9,800 MHS Exercise 4-11 Part 1 Required: 1. Compute the activity rate for each of the activity cost pools. Activity Cost Pool Labor-related Purchase orders Product testing Template etching General factory Activity Rate per DLH per order per test per template per MH

Answer 1

Answers

• Requirement 1

Activity Cost Pool	Activity Rates
	[A/B]
Labor-related	$                                                       18.00	per DLHs
Purchase orders	$                                                         4.00	per orders
Product testing	$                                                       19.00	per tests
Template etching	$                                                       30.00	per templates
General factory	$                                                         7.00	per MHs

--Working

Activity Cost Pool	Activity Measure	Expected Overhead cost	Expected Activity		Activity Rates
		[A]	[B]		[A/B]
Labor-related	Direct labor-hours	$                  43,308.00	2,406	DLHs	$                                                       18.00	per DLHs
Purchase orders	Number of orders	$                     2,160.00	540	orders	$                                                         4.00	per orders
Product testing	Number of test	$                     5,700.00	300	tests	$                                                       19.00	per tests
Template etching	Number of templates	$                     1,950.00	65	templates	$                                                       30.00	per templates
General factory	Machine-hours	$                  68,600.00	9,800	MHs	$                                                         7.00	per MHs

• Requirement 2

	Total
Product A	$    38,430.00
Product B	$    27,008.00
Product C	$    29,330.00
Product D	$    26,950.00

--Working

	Expected Activity	Activity Rates		Overhead Allocated
Activity Cost Pool	Product A
Labor-related (DLHs)	650	$                           18.00	per DLHs	$         11,700.00
Purchase orders (orders)	100	$                             4.00	per orders	$               400.00
Product testing	170	$                           19.00	per tests	$           3,230.00
Template etching	-	$                           30.00	per templates	$                        -
General factory	3,300	$                             7.00	per MHs	$         23,100.00
Amount of Overhead Cost assigned				$         38,430.00
	Expected Activity	Activity Rates		Overhead Allocated
Activity Cost Pool	Product B	[A/B]
Labor-related (DLHs)	156	$                           18.00	per DLHs	$           2,808.00
Purchase orders (orders)	170	$                             4.00	per orders	$               680.00
Product testing	60	$                           19.00	per part types	$           1,140.00
Template etching	46	$                           30.00	per boards	$           1,380.00
General factory	3,000	$                             7.00	per MHs	$         21,000.00
Amount of Overhead Cost assigned				$         27,008.00
	Expected Activity	Activity Rates		Overhead Allocated
Activity Cost Pool	Product C	[A/B]
Labor-related (DLHs)	800	$                           18.00	per DLHs	$         14,400.00
Purchase orders (orders)	120	$                             4.00	per orders	$               480.00
Product testing	-	$                           19.00	per part types	$                        -
Template etching	15	$                           30.00	per boards	$               450.00
General factory	2,000	$                             7.00	per MHs	$         14,000.00
Amount of Overhead Cost assigned				$         29,330.00
	Expected Activity	Activity Rates		Overhead Allocated
Activity Cost Pool	Product D	[A/B]
Labor-related (DLHs)	800	$                           18.00	per DLHs	$         14,400.00
Purchase orders (orders)	150	$                             4.00	per orders	$               600.00
Product testing	70	$                           19.00	per part types	$           1,330.00
Template etching	4	$                           30.00	per boards	$               120.00
General factory	1,500	$                             7.00	per MHs	$         10,500.00
Amount of Overhead Cost assigned				$         26,950.00